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DOJ Says Guidance Documents Can’t Drive Enforcement Actions

A new policy out of the Justice Department prevents department litigators from relying
on guidance documents to establish legal violations in civil enforcement actions.

The
policy announced Jan. 25 means guidance documents can no longer be used as a basis for bringing
civil enforcement actions, and it could lessen the risk companies will face catastrophic
punitive damages, particularly in False Claims Act cases.

The new policy follows on the heels of a November 2017
memo issued by Attorney General Jeff Sessions, which prohibited agency guidance documents
from being converted into binding rules. “In the past, the Department of Justice and
other agencies had blurred the distinction between regulations and guidance documents,”
the DOJ said in a Jan. 25 statement announcing the policy.

“Although guidance documents can be helpful in educating the public about already
existing law, they do not have the binding force or effect of law and should not be
used as a substitute for rulemaking,” Associate Attorney General Rachel Brand said
in the statement.

“Consistent with our duty to uphold the rule of law with fair notice and due process,
this policy helps restore the appropriate role of guidance documents and avoids rulemaking
by enforcement,” she said.

False Claims Impact

“This new policy from the Associate’s Office is a very significant development for
life sciences and health-care enforcement cases,” Laurence Freedman of Mintz Levin
told Bloomberg Law Jan. 26. “It is a terrific step to ensure fair notice and due process
in False Claims Act and other cases, and to make it crystal clear that subregulatory
guidance does not create enforceable rights and obligations.”

“In life sciences and health care, there has been an explosion of subregulatory guidance,
and many have noted that this has become regulation through enforcement,” Freedman
said. “The policy draws a sensible line—subregulatory guidance can be used to establish
knowledge of regulatory requirements, but not to create new obligations,” he said.

Freedman’s health-care and life sciences litigation practice focuses on defending
clients against allegations and investigations of fraud and abuse involving governmental
programs.

“This new policy has the potential to be very significant with respect to DOJ’s enforcement
of False Claims Act cases, most of which are initiated by individual whistleblowers,”
Laura F. Laemmle-Weidenfeld of Jones Day in Washington told Bloomberg Law Jan. 26.

“The DOJ is the only federal agency with authority to prosecute FCA cases, although
it is expected to consult with its client agencies such as FDA and HHS-OIG in the
process of bringing such cases,” according to Laemmle-Weidenfeld, who is a Bloomberg
Law advisory board member and specializes in defending clients in health-care fraud
enforcement actions.

“The guidance has a significant impact on civil enforcement by DOJ and is aimed squarely
at punitive False Claims Act enforcement that may not be supported by clear regulations
or statutes,” Katie McDermott of Morgan, Lewis & Bockius LLP in Washington told Bloomberg
Law Jan. 26. She is also a Bloomberg Law advisory board member and specializes in
defending clients in health-care fraud enforcement actions.

No More ‘Bootstrapping’ Claims

The new policy could decrease the chances that the government will use guidance-type
documents such as fraud alerts and advisory opinions to bootstrap civil claims against
companies, Kevin G. McAnaney of the Law Offices of Kevin G. McAnaney in New York said.
It’s also likely to be useful against relators’ counsel who routinely try to use guidance
as proof of kickback violations, he told Bloomberg Law Jan. 26.

The DOJ routinely uses Office of Inspector General special fraud alerts, bulletins,
and advisory opinions in support of anti-kickback and False Claims Act cases, according
to McAnaney, who specializes in health-care fraud issues.

“The government loves to make the argument that the fraud alerts, advisory opinions,
etc. ‘put industry on notice’ and then tries to bootstrap that into ‘knowing’ false
claims,” he said.

Guidance Needed

“There is a need for this guidance in FCA cases, which are evolving too often into
regulatory or contract violation cases cobbled together sometimes by no more than
draft agency guidance or inconsistent guidance that purports to be lawmaking,” McDermott
said.

“The guidance suggests there should no reliance on guidance documents in conference
room arguments by DOJ to suggest highly punitive liability,” she said.

“There is a great deal of unaccountability and arbitrariness when enforcement rests
on guidance documents which can be in draft form or even inconsistent,” McDermott
told Bloomberg Law. “It is often difficult to get enforcers or policy makers to care
about these issues so this guidance is a good start to reframing where enforcement
should begin, which is assessing a violation of law, not policy,” she said.

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